Former Bank President Arrested for Fraud

The former president and CEO of the Park Avenue Bank has been arrested and charged with attempting to embezzle more than $11 million from the Troubled Asset Relief Program.

Charles J. Antonucci Sr. is the first defendant ever charged with attempting to defraud the TARP funds. He was also alleged to have used the bank in a scheme to defraud two pastors of a Florida congregation out of more than $100,000 set aside to build a new church.

Antonucci was arrested Monday morning in Fishkill, N.Y., and was scheduled to appear in Manhattan federal court on Tuesday. Last Friday, New York State banking authorities seized the bank and appointed the Federal Deposit Insurance Corp. as receiver.

Antonucci allegedly engaged in numerous instances of self-dealing at the bank, including authorizing extensions of credit and overdrafts to customers with whom he had financial relationships; authorizing extensions of overdraft credit to a customer in exchange for the use of the customers private plane; and causing the bank to make improvements on, lease, and pay expenses for properties owned by Antonucci.

He allegedly used a company he owned, Easy Wealth Group, to fraudulently obtain funds from the Park Avenue Bank. To mask his interest in Easy Wealth, in early 2006, Antonucci approached an associate and offered to make him president of Easy Wealth, with the understanding that his first order of business would be to apply for a line of credit from the bank.

The Easy Wealth president applied for a line of credit from the bank in the amount of $300,000. Antonucci personally approved the line of credit and later increased it to $400,000. Antonucci even assisted the Easy Wealth president in preparing the line of credit application documents. The application as submitted contained numerous misrepresentations, including false statements concerning the Easy Wealth president's personal assets and a fabricated business plan that contained false information about Easy Wealth's financial condition and earnings.

After the Easy Wealth president had drawn down the line of credit, Antonucci approached him and demanded that he pay $70,000 to Antonucci in the form of interest-free loans. Antonucci only repaid $50,000 of the money. Easy Wealth ultimately defaulted on the fraudulently-obtained line of credit, causing a loss to the Park Avenue Bank of $400,000.

Antonucci also approved approximately $8.5 million worth of overdrafts at the Park Avenue Bank to companies controlled by a co-conspirator, who was a close associate of Antonucci's. Through the entities, the associate brought numerous deposit accounts to the Park Avenue Bank, and submitted applications for numerous loans from the bank.

On more than 10 occasions in 2008 and 2009, Antonucci used the associates private plane to fly for free to Florida and Panama, among other destinations. They also flew to Arizona so Antonucci could attend the Super Bowl, and to Augusta, Ga., so that Antonucci could attend the Masters golf tournament.

All the while, Antonucci approved over $8 million in overdrafts for the entities' various accounts at the Park Avenue Bank. On one occasion in 2009, when a check issued by an entity bounced, the co-conspirator communicated to Antonucci that he would not be allowed to use the private plane.

Antonucci also arranged for the bank to improve, lease and pay expenses for properties he personally owned. Over a period of years, he had the bank spend more than $1 million on three properties in Fishkill in which he had an ownership interest. Antonucci arranged for the bank to make these payments even though it had no legitimate need for two of the three properties.

In addition, Antonucci is also charged with using his position at the bank to defraud bank regulators by arranging a round-trip transaction designed to show that Antonucci himself had invested approximately $6.5 million in the bank in an effort to improve its capital position. In fact, prosecutors claim, Antonucci had fraudulently borrowed from the bank itself the funds that he purportedly invested.

In 2009, when the FDIC began investigating the source of the purported $6.5 million capital infusion, prosecutors claim that Antonucci lied to FDIC regulators about the true nature of the transaction. Antonucci also provided regulators with documents purporting to whow that he obtained the $6.5 million from sales of stock, but those sales were actually sham deals designed to disguise the fact that the true source of the funds was the bank itself.

Antonucci also used the $6.5 million round-trip transaction to support an application for taxpayer rescue funds through TARP. Once again, the bank's capital position was fraudulently misrepresented on its TARP application. Then, in telephone calls to FDIC regulators reviewing the bank's TARP application, Antonucci, in an effort to obtain more than $11 million in TARP funds, again falsely represented that he had made a substantial, personal capital contribution to the Park Avenue Bank.

When he was advised by the FDIC that it would not recommend approval of his TARP application, he withdrew the application voluntarily. But he was quoted as claiming that the bank withdrew its TARP application because of "issues" with the TARP, and the desire to avoid "market perception" that "bad bank[s]" take TARP money.

Antonucci also is charged with a scheme to defraud the pastors of the Calvary Springs Chapel in Coral Springs, Fla., who were interested in obtaining investment income for the construction of a new church. A co-conspirator promised the pastors that if they invested $103,940 in the purchase of a bond, he would borrow up to four times that amount in foreign markets, and pay the pastors back the maturity value of the bond, $604,848, within two to three weeks.

The co-conspirator instructed the pastors to pay the $103,940 investment to an account at the Park Avenue Bank held in the name of Park Avenue Insurance. That account was in fact owned by Antonucci. After a series of misrepresentations by Antonucci and the co-conspirator, the pastors never received the promised $604,848 return, or the return of their initial investment. Instead, Antonucci and the co-conspirator simply divided the pastors' $103,940 investment between themselves, according to prosecutors.

GRC is relevant for organizations across the spectrum, from Fortune 100 multinationals to fast-growing companies aiming for international expansion, an IPO or a buyout. The traditional approach of managing risk in silos across different functions—internal audit, internal controls and compliance— and reacting to risks as they occur puts many companies at a disadvantage. Today’s environment demands a more agile and innovative approach to GRC.